Posted: Mon 18th Jan 2021
Running your own business can be exciting, draining, liberating, stressful and satisfying – all at the same time. Doing it without any outside investment can be a risky proposition, but with risk comes reward.
While some people might view a small budget when starting a business as a disadvantage, experience has shown that it can prove highly beneficial in the long run. This blog sets out some practical tips on how to overcome any financial disadvantages when launching a new business.
Making the right decisions that benefit long-term growth
As a business owner, you'll be under constant pressure to make decisions that are critical to your business's growth and direction. Make sure you're clear about your overall strategic direction by applying the following principles:
Develop a clear business proposition by becoming an expert on the competitive landscape and identify what you can offer that differs from your competitors, but that also meets the needs of your market.
Reflect on what you are good at and bring your skills, knowledge and experience to the table.
Have a clear vision of what you want your business to look like in five years time, who your clients or customers might be, and what you want to be known for within your industry.
Surviving on a shoestring budget
Self-funding your own business will cause you to reassess and prioritise your personal expenses. In the early stages, you'll be surviving off very little, without the comfort of a steady pay cheque.
Many financial survival tips are obvious, like 'save money wherever you can'. Here are three that are less obvious, but just as important:
Develop a cash-flow forecast. You need to know what you're going to spend and when, and plot this against when you're going to receive any income.
Build a 'buffer'. Cash flow is what generally kills good start-ups. Holding a buffer, or company reserve, is a much better way of protecting against this than a bank loan or an overdraft.
Be wary of committing to too many capital outlays that don't align with your business strategy (i.e. lease or hire, don't always buy).
When and how to accelerate?
Despite wanting to conserve your cash without any major capital outlays, there comes a time when a business needs to accelerate.
A steady growth model is far more scalable and allows you to fully test the market before expanding further. You're also much less likely to fall victim to the cycle of 'boom and bust'.
The right time for growth is when your business is in the middle of a successful period, with a few strong months just gone and a couple more forecast to follow. Be aware that expansion will eventually require additional resources to succeed, including labour, equipment, finances and more micro-management.
The old adage 'Revenue and staff numbers for show, profit for dough' still rings true. It can be exciting to feel like you're expanding, but never take your eye off the bottom line. For the vast majority of start-ups, this is the only true measure of success!
Self-funding your business can provide many advantages, from enormous personal satisfaction to being able to take a greater share of the spoils when your business succeeds.
Making sure you have the right business proposition, the passion to make it happen and being realistic about what you can and can't achieve are key to a successful and scalable business start-up model.